Education & You: A Smart Money Approach to Paying for College

Your high school kids are probably thinking about spring break, but you and your spouse are no doubt concerned about how to pay for college without breaking the family bank.

Millions of of American high school juniors are starting their college search, while seniors are deciding which school they'll actually attend.

In both cases, Mom and Dad might be tempted to vote with their wallets. After all, higher education is a business — and a very competitive one, governed by supply and demand and access to capital. In a phrase, it is a case study in free-market economics

Outsized increases in college tuition, fees, room and board are now largely suburban legend, but costs are still rising more than bellwether inflation indices. Nevertheless, attendance is rising.

The average cost of attendance at a four-year, in-state public school in 2010-2011 year was 6.1 percent more ($16,140) than the previous year; that of a four-year private university was 4.3 percent more ($36,993), according to the College Board's Trends in College Pricing 2010 report.

cost of education

Paying for that isn't easy. One out of three students seeking a bachelor's degree had an average loan of $12,600, according to a National Postsecondary Student Aid Study, covering the 2007–2008 year. Others owed far more.

The good news is that the federal government has been helping more, but that may no longer be the case with growing budget constraints.

Money for Federal Pell Grants jumped by more than a third to $28.2 billion during the 2009-2010 academic year, with 7.7 million students benefiting, according to a student aid study. Billions more was available in low-cost, fixed-rate Stafford Loans.

The payoffs are clear. College grads earn more than those with a degree ($22,000 according to the College Board) and are less likely to be unemployed. And in today's increasingly global economy, you may be competing with someone in another country, never mind another school or state.

As convincing as that cost-benefit analysis may be, you still have to pony up thousands of dollars. Like most major expenditures in life, the best way to cover it is by saving. It may not cover the whole bill, but along with the right financial aid, it could keep debt at a manageable level.